Apple and Facebook Earnings

How They Fared in Q2 2013

Apple's (NASDAQ: AAPL) and Facebook's (NASDAQ: FB) stock are two of the most watched on Wall Street.

Each company is indicative of future trends in the tech market, and trouble has plagued both companies in some form.

Apple reported its June quarter sales at $35.3 billion and earnings of $7.47 per share, or $6.9 billion in net profit. iPhone sales also increased 50% and have done especially well among developing nations.

Total iPhone sales reached a record 31.2 million for the June quarter, compared to 26 million one year ago. Sales for the iPad dropped 14% to 14.6 million.

The report exceeded analyst expectations of $7.32 per share and $35.01 billion in sales. Last year, earnings per share were $9.32 based on $35.02 billion in sales, but previous quarter results were $43.6 billion in sales and earnings of $10.09 per share, or $9.5 billion net profit.

For Facebook, analysts expect .14 per share on a total revenue of $1.62 billion. Last year’s results showed .8 per share at $1.18 billion, a $157 million loss. Revenue from the second quarter was $1.46 billion at .9 per share.

In the first quarterly report, Facebook highlighted 751 million monthly visitors on mobile platforms, a 54% increase from the previous year.

Total revenue for advertising was $1.25 billion, comprising 85% of total revenue for the last quarter. Mobile advertising represented 30% of all advertising revenue for the first quarter.

Facebook is expected to release its second quarter earnings on July 24, 2013 at 2:00 PM PST (5:00 PM EST).

Apple/Facebook Obstacles

On Facebook’s end, its IPO initially got off to a rocky start with investors, and there have been accusations of Facebook stock only favoring company insiders and those who have the means to purchase large bulk shares.

Facebook has also received criticism for handing out free shares to employees and insiders, while charging high prices when the stock made its debut on the market. And there has been criticism of Facebook’s lack of physical products on the market to reassure mainline investors that the social network will continue to be profitable.

There is a risk in remaining focused on advertising while doing little to diversify the Facebook brand. Public stock in a social media website is an entirely new ballgame, but with more teens and other users switching over to other social media platforms – stemming from a rising tide of dissatisfaction with Facebook’s privacy policies – one has to wonder if Facebook is a mere fad that will fade away as another social network inevitably takes its place.

To Facebook’s credit, the company has been excelling in advertising, and analysts are hopeful of the social network’s mobile sphere. There is also high promise for Facebook’s upcoming video service for its photo app Instagram.

The rise of tablets and smartphones has contributed to a greater need for advertising to reach people wherever they go. One of Facebook’s strong-suits is the ability for the social network to reach millions of people worldwide through mobile mediums, regardless of the platform.

Analyst Youssef Squali from Cantor Fitzgerald believes Facebook quarterly results could show a 30 percent increase from the first quarter but was quick to point out Facebook’s lack of advertising power in Europe as something that could hurt revenue.

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Facebook is very much in the same predicament as Apple; both companies need an interesting product to create greater vested interest from investors and the public. Since Facebook has no such products, Apple is in a good position to dominate within its respective field.

Apple stock already dropped from a high of $702 in September 2012. Many of those who still retain Apple stock are individuals; many institutional investors are beginning to bail out, but some may remain after positive after better than expected iPhone sales.

The iPhone makes up a little over half of the company’s sales. But there has been growing concern over the saturation and maturity rate of smartphones. iPhone sales beat expectations, but is there real room for next-level innovation in the smartphone market?

But the market seems to be headed in the direction of feature phones and expansion into developing countries like China and India.

And critics still maintain that Apple has an innovation problem. Apple has delayed competition with Google (NASDAQ: GOOG) Maps. Apple has excelled at touch-screen capability, but it's recently failed to develop anything major beyond that milestone.

Much of the tech excitement on the market has centered on smaller tech companies with new and diverse products. Apple has the brand and the resources to draw in more investment, but it needs that ground-breaking product to skyrocket back to $700 market value.

The new OS X Mavericks and the iOS 7 Mac Pro will be released soon, and Cook said new products are being developed for the fall of this year and 2014.

Other Apple innovations to watch out for are the iWatch, a cheaper version iPhone, and iTV. None of these products have been officially announced, but Apple fanatics are expecting this soon.

Record iPhone sales will keep the company invested in smartphones going forward, but it will be interesting to see how it approaches lower-cost smartphones for international markets like China.

How will Both Companies Move Forward?

Overall, both companies have the potential to build from current operations. Facebook can still maintain viability in the advertising market, and Apple will continue to keep sales going with the iPhone and other new gadgets.

Mobile technology and advertising are great fields to get into, but can Facebook continue to do well with no real-world products to draw in more investors? And how will Apple address the saturation of the smartphone market? Can the company stay one step ahead of its competitors with other products?

Both of these companies are facing ever growing competition in their respective fields, and it remains to be seen if the companies can adapt to changing markets.

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